Impacts on small business from Budget 2016

May 15th, 2016


It's that time of year again, when the federal government lays out their fiscal and economic plans for the next 12 months and beyond. The federal Budget for 2016-17 faces added scrutiny given the impending double dissolution election in early July, announced by Prime Minister Malcolm Turnbull on May 9.

As the Australian Bureau of Statistics (ABS) notes that the vast majority of the nation's businesses fall into the small-to-medium range, you can expect a number of the Budget policies outlined by Treasurer Scott Morrison to have an impact on the sector. Federal Small Business Minister Kelly O'Dwyer, spoke highly of planned reforms to support the millions of Australians who make up so much of our national economy.

"As a vital sector of our economy and the home of Australian enterprise and innovation, Australia's hardworking small businesses need a tax system that actively supports them," O'Dwyer said.

"These important reforms build on the government's biggest small business initiative in our nation's history, the 'Growing Jobs and Small Business' package, which was a key feature of last year's Budget."

So what particular reforms should small-business owners be paying the most attention to, and how are their fortunes likely to be affected?

The federal government is looking to help small business ahead of the coming election.
The federal government is looking to help small business ahead of the coming election.

The Ten Year Enterprise Tax Plan

The centrepiece of Budget 2016-17, at least as far as small businesses are concerned, is the newly devised Ten Year Enterprise Tax Plan. Designed to ease the taxation burden on businesses with less than $10 million of annual turnover, the plan aims to support growth, jobs and increase wages, while also providing a more attractive environment for foreign investment. In his Budget announcement speech on May 3, Morrison described the challenges facing the nation. 

"We will not be able to rely on our natural advantages in resources to secure the jobs of the future like we have in the past. If we wish to continue to see our living standards rise with more jobs and higher wages, we need to ensure our tax system encourages investment and enterprise."

Lower tax responsibilities can have a significant impact on small business cash flow.

With that in mind, from July 1, 2016, the company tax rate for businesses under that $10 million threshold will drop from 30 per cent to 27.5, with further reductions over the next decade set to lower the rate to 25 per cent. 

The comparatively high tax rate has long been a concern for small business in Australia, however the reductions outlined in the new Budget are set to bring the country below the OECD average, encouraging a more competitive marketplace. Three million companies across the nation are set to benefit from the reforms, as lower tax responsibilities can have a significant impact on small business cash flow. 

Improved support for new businesses

Along with supporting established small businesses, Budget 2016-17 continues the work laid out in last year's National Innovation and Science Agenda. That scheme was designed, in part, to help Australian organisations introduce innovative technology, through tax concessions and immediate deductions for individual assets worth up to $20,000.

According to O'Dwyer, that deduction scheme will be available to more businesses from July 1, following the same $10 million threshold model outlined above for company tax. On top of that, emerging companies are also set to benefit should the government's new initiatives be passed, with tax concessions for early stage investors and venture capital intended to encourage investment in innovative startup firms.

All of these planned reforms add up to a hugely attractive package supporting small business growth and investment in Australia, at least in the eyes of the current federal government. As PricewaterhouseCoopers (PwC) notes, Prime Minister Turnbull himself has been heard to declare "There has never been a more exciting time to be an Australian."

The time is right for small businesses to innovate.
The time is right for small businesses to innovate.

Getting a head start on growth

While many of these discussion points will hinge on what results come from the polls on July 2, it's a good bet that the opposition will present something comparatively enticing for small business in their election campaigning. We've established that the majority of Australia's economy is built around these organisations, so presenting them with promising policies makes sense for either side of the debating chamber. 

Taking that into consideration, it's likely that the environment for Australian small-business owners will be a good one for the foreseeable future. For many, developing strategies for growth will already be underway, as having access to cash flow to fund innovation plans is essential.

That's where debtor finance can help. Investing in your company's future may be a priority for you now, not in a few months time when you've managed to collect your outstanding invoices. Speak to us today, and see how easy it can be to secure more consistent incoming finance for your small business. 

If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].